CFTC Withdraws Specialized Guidance On Cryptocurrency Derivatives

In step with the Securities and Exchange Commission’s (“SEC”) transformation from cryptocurrency adversary to ally, the Commodity Futures Trading Commission (“CFTC”) is now following its sister agency’s lead. By withdrawing its specialized guidance on digital currency derivatives, the CFTC signals a more accommodating regulatory approach that recognizes the growing maturity and mainstream acceptance of digital asset markets. As of March 28, 2025, both CFTC Staff Advisory No. 18-14 and the subsequent 2023 guidance, CFTC Staff Advisory No. 23-07 have been officially withdrawn, marking a clear departure from the agency’s previous cautionary stance.^{1 2}

What’s In the Advisories

The CFTC’s first digital asset advisory, Letter No. 18-14, came in 2018 when digital asset derivatives products and their underlying spot markets were new, rapidly evolving, and entering mainstream financial markets.³ The guidance came three years after the CFTC determined that Bitcoin and other virtual currencies are properly defined as commodities, but are nevertheless unlike other commodities the CFTC has seen traditionally, making specific guidance necessary. The CFTC’s guidance focused on five areas:

1. Enhanced market surveillance: The CFTC recommended exchanges establish information sharing arrangements with underlying spot markets to access broader trade data, including trader identities, prices, volumes, and quotes. This surveillance extended beyond standard requirements, with continuous monitoring of spot market data feeds to identify anomalies that could impact derivatives trading.
2. Coordination with CFTC staff: Exchanges were expected to maintain regular communication with the Commission on surveillance matters, provide data related to settlement processes upon request, and coordinate the timing of new contract launches to allow for proper monitoring of newly-listed instruments.
3. Large trader reporting: Due to potential manipulation concerns, the CFTC recommended exchanges set the large trader reporting threshold at just five bitcoin (or equivalent) – significantly lower than typical commodity thresholds. This aimed to identify potential manipulative activity by capturing 70-90% of total open interest.
4. Outreach to stakeholders: Exchanges were directed to solicit feedback beyond standard market participants, including from clearing members and FCMs not planning to offer clearing services. This expanded consultation aimed to inform contract design and identify potential risks overlooked in standard development processes.
5. DCO risk management: For clearinghouses, the CFTC emphasized rigorous margin requirements exceeding those for less volatile commodities, requiring margin levels commensurate with the unique volatility profiles of digital assets. DCOs were also expected to document their governance processes and explain how they addressed any dissenting views regarding clearing arrangements.

A later 2023 advisory (Letter No. 23-07) narrowed focus to clearinghouses, emphasizing concerns about system safeguards, physical settlement procedures, and conflicts of interest in digital asset clearing.⁴

What Withdrawing Them Means

Friday’s withdrawal is part of a significant shift in the federal government’s regulatory approach toward cryptocurrency. By eliminating these special guidance documents, the CFTC is likely to facilitate easier listing of new cryptocurrency-based products on regulated exchanges, reflecting greater mainstream acceptance and market demand in recent years, especially following the Trump Administration’s amicability toward the industry.

This regulatory normalization has several important implications:

1. Reduced compliance burden: Exchanges can now list new cryptocurrency derivatives without meeting additional requirements beyond those applied to other commodity contracts.
2. Standardized oversight: Digital assets will be governed under the CFTC’s established commodity regulatory framework rather than through specialized guidance.
3. Institutional confidence: The removal of exceptional requirements may encourage greater institutional participation in cryptocurrency derivatives markets, potentially enhancing market depth and stability.
4. Market recognition: The withdrawal implicitly acknowledges that cryptocurrency markets have developed adequate price discovery mechanisms, transparency, and liquidity to function within standard regulatory parameters.

The recent policy changes of both the SEC and CFTC bring about the most auspicious conditions the cryptocurrency industry has ever seen, marking a milestone in cryptocurrency’s journey from regulatory outlier to an accepted part of the mainstream financial landscape.  As stated in today’s withdrawal letter, the CFTC determined to withdraw the advisory “given additional staff experience with virtual currency derivative product listings and increasing market growth and maturity” — a clear acknowledgment from the CFTC that they believe that the cryptocurrency market has evolved beyond the need for specialized regulatory treatment.

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